Correlation Between Morgan Stanley and IShares Global

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and IShares Global at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Morgan Stanley and IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Morgan Stanley Direct and iShares Global Comm, you can compare the effects of market volatilities on Morgan Stanley and IShares Global and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Morgan Stanley with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and IShares Global.

Diversification Opportunities for Morgan Stanley and IShares Global

0.88

Correlation Coefficient

Morgan Stanley  IShares Global

Very poor diversification

The 3 months correlation between Morgan and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and iShares Global Comm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Comm and Morgan Stanley is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Morgan Stanley Direct are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Comm has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and IShares Global go up and down completely randomly.

Pair Corralation between Morgan Stanley and IShares Global

Given the investment horizon of 90 days Morgan Stanley is expected to generate 3.44 times less return on investment than IShares Global. In addition to that, Morgan Stanley is 1.06 times more volatile than iShares Global Comm. It trades about 0.04 of its total potential returns per unit of risk. iShares Global Comm is currently generating about 0.15 per unit of volatility. If you would invest  9,580  in iShares Global Comm on September 28, 2024 and sell it today you would earn a total of  302.00  from holding iShares Global Comm or generate 3.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  iShares Global Comm

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Global Comm

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Comm are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Global is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Morgan Stanley and IShares Global

The main advantage of trading using opposite Morgan Stanley and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, IShares Global can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares Global will offset losses from the drop in IShares Global's long position.

The idea behind Morgan Stanley Direct and iShares Global Comm pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.